Non-Fungible Token (NFT)
NFT stands for "Non-fungible Token." It is a type of digital asset that represents ownership or proof of authenticity of a unique item or piece of content using blockchain technology, typically on platforms like Ethereum.
The term "non-fungible" refers to the fact that each token is distinct and cannot be replaced or exchanged on a one-to-one basis with another token, unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible and can be exchanged on a like-for-like basis.
Additionally, NFTs are unique and cannot be divided into smaller units like cryptocurrencies. Each token has distinct information that sets it apart from any other token. NFTs can represent digital art, music, videos, virtual real estate, virtual goods in video games, collectables, and more.
One notable feature of NFTs is that creators can embed royalty mechanisms in the smart contracts. This allows them to receive a percentage of the resale value each time the NFT changes hands, providing ongoing compensation for their work.
NFTs can be transferred or traded across different platforms that support the same standards, enhancing interoperability in the digital asset space.
The FATF on NFTS
In the FATF’s 2024 Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers, the FATF stated that it would continue to monitor the risks that NFTs pose. It further suggested that jurisdictions monitor the risks associated with NFTs and share their experiences, including data collection and risk mitigation. Moreover, they prompted the private sector to ensure appropriate risk identification and mitigation measures are in place.